Defending a debt claim against your business
They have drawn on their knowledge to provide some tips on how to defend a claim when it is alleged your business owes money.
1. Check the contract or agreement
Disputes arise when people they feel they should not have to pay a bill, but there may be a clear contract term which allows the other side to legitimately demand payment and you may struggle to dispute it. If you receive a bill or demand for payment that you dispute, check what terms you actually agreed with the other side and the mechanism the other side has to follow. If you are unsure what the contract means, take early advice.
2. Request further information
If the basis for the debt is not clear, for example the terms are not clear, or it is unclear how the bill is calculated or what services or goods it relates to, request information from the other side. The burden is on them to prove the money is owing and to do so clearly. However, if you use requests for information purely as a delay tactic, this may work against you, and the other side may issue a claim against you.
3. Check the amount
If you dispute the amount of the bill, check how the amount is calculated. Ask for a clear breakdown together with proof. If any part is unclear, ask for clarification. If any part seems ambiguous ask for justification. If you consider another amount is due, you could set this out and invite comment.
4. Try and negotiate a payment plan
If you admit the debt is payable but cannot afford to pay in one go, to try and avoid court proceedings, you could try offering payment by instalments. This might be more attractive for the other side rather than issuing a claim. There is no automatic right to entitle you to pay by instalments and the other side is not obliged to agree. You could use it to try and negotiate.
5. Are there issues with the service or goods provided?
If you dispute the money is owing because of some serious issue with the service or goods provided, you may be able to dispute the money is owing and potentially claim against the creditor. This is not an automatic right and it is sensible to take early advice. The risk is the other side might disagree and issue a claim against you.
6. Has the other side mislead you?
If the party demanding payment encouraged you to contract with them on the basis of a particular statement which turned out to be untrue and caused you loss, you may be able to dispute you owe the money and you could potentially turn the tables and claim compensation yourself. This depends on the facts, you do not have an automatic right and should take early advice.
7. Take advice and action quickly
Many people who owe money or dispute the debt is owing delay dealing with demands, hoping it will go away or sort itself out. Unfortunately, this can result in relatively small debts escalating and increasing hugely.
Delay may allow the other side to get judgment, which if you fail to pay, may affect your credit rating for a long time. If you delay too long, you might not be able to overturn the judgment and it might be binding.
It is important to deal with the matter straight away. Delay of even a few days can potentially harm your position.
8. If you genuinely cannot afford to pay or have many debts
If you genuinely cannot pay the debt and / or have many other debtors, you should take early legal advice. The other side might try and make you bankrupt. There may be legal mechanisms to help you guard against this. You should take independent advice from a specialist.
9. Have the actions of the other side caused you loss?
If the party demanding payment has caused you losses equal to or more than the amount being requested, you may be able to bring a claim against the other side and potentially offset the debt against your claim. This is called a counterclaim. This right is not automatic, and whether or not you can do so depends on the facts of you position, and you should take early advice. You may be able to turn the tables.
Defending a Debt Claim Against Your Business Lawyers
Our team's expertise isn't limited to debtors within England, having recently taken action on behalf of creditors of an insolvent company chasing debts of many millions both in Europe and beyond.
At Saunders Law, we're dedicated litigators with vast experience assisting clients to resolve their commercial disputes. We're well-known for our high-profile work and excellent client satisfaction. Operating from offices facing the High Court in central London, we're also ideally located to handle commercial litigation. For a free, no-obligation, initial discussion of how we may be able to help, please contact us 02076324300.